NYT: Electronic Device Stirs Unease at Book Fair

[chrissy]

The article Electronic Device Stirs Unease at Book Fair in the New York Times today covers the growth in consumer awareness around electronic book reading devices, some publishers' reactions to this being a possible tipping point for the electronic book, and the fears of some booksellers who view this as a threat to their businesses.

Some interesting paragraphs from the article:

Much of the talk was focused on the Kindle, Amazon’s electronic reader, which has gained widespread acclaim for its ease of use. Jeffrey P. Bezos, the founder and chief executive of Amazon, spent much of a packed session on Friday evangelizing about the Kindle, which he said already accounts for 6 percent of his company’s unit sales of books that are available in both paper and electronic formats.

But excitement about the Kindle, which was introduced in November, also worries some publishing executives, who fear Amazon’s still-growing power as a bookseller. Those executives note that Amazon currently sells most of its Kindle books to customers for a price well below what it pays publishers, and they anticipate that it will not be long before Amazon begins using the Kindle’s popularity as a lever to demand that publishers cut prices.

Booksellers, who make up the other major group attending the publishing convention, are also concerned that electronic books could become more than a passing fancy for an electronically savvy subset of customers. "It certainly does feel like a threat," said Charles Stillwagon, the events manager at the Tattered Cover Book Store, a large independent bookseller in Denver.

Nearly all publishers say their sales of electronic books are growing exponentially. Carolyn K. Reidy, the chief executive of Simon & Schuster, said its sales of electronic books will more than double this year compared to last year, after growing 40 percent in 2007 from 2006. David Shanks, the chief executive of Penguin Group USA, said his company sold more electronic books in the first four months of 2008 than in all of last year.

Much of the expected growth in electronic books can be tied to the Kindle. When Amazon introduced the product, it sold out of the machines on the first day. The company needed months to adjust its manufacturing capacity and supply chain to be able to keep Kindles in stock, which Mr. Bezos said it has now accomplished.

The chief competitor to the Kindle is the Sony Reader, which has been on the market since 2006 and has also helped boost sales of electronic books. Some technology critics have given the early advantage to the Kindle, however, which downloads books, daily newspapers and magazines wirelessly; the Sony Reader downloads content via a wired connection.

The reluctance of Amazon and Sony to release sales figures continues to make the claims of various parties difficult to substantiate, resulting in contradictory statements such as the following --

But he also claimed that Kindle users are buying more books, not simply exchanging one format for another. He said that after buying a Kindle, Amazon customers purchase just as many physical books and two and a half times as many books overall, or three electronic books for every two physical copies.

Some publishing executives dispute that claim. "We don’t see people buying both versions," Mr. Shanks said. "I think there is almost a one-to-one cannibalization."

But neither Amazon nor Sony will say how many of their products they have sold, making it impossible for publishers to assess the size of the market or for bookstore owners to evaluate the threat.

One publisher estimated that Amazon had sold roughly 10,000 Kindles, while another estimated that as many as 50,000 electronic-book readers of all types are in general circulation. But both publishers, who spoke on the condition of anonymity, said that those figures were little more than educated guesses.

[tcv]

Valleywag did their write-up on the event as well. With the trademark snark.

The representatives declined to discuss sales numbers of the Kindle, only saying that it's generally first or second on the list of best selling items in the retailer's electronics category. And there was no information about demographics — a critical piece of data to book marketers, where the sheer number and breadth of subject matter in published titles, combined with limited marketing budgets, mean that niche audience appeals are critical.

At some point, I think Amazon is going to have to say _something,_ even if it's under NDA.

This, on the other hand, is just baffling:

There were maybe three or four units on display, each closely held by a spokesperson. Visitors weren't even allowed to handle one of the devices for themselves, presumably for fear they'd walk away with one.

C'mon. Really? Seriously? I suppose it's lucky that the devices are even working, instead of the "non-functioning device displays" one finds at PDA and phone counters nowadays. Sorry, I got contact snarkiness while reading Valleywag.

[wallcraft]

I don't think Amazon is selling most of its Kindle books for "well below what it pays publishers". My impression is that publishers get 35% of the list price (e.g. the price shown at mobipocket.com). Amazon deeply discounts the list price, but not to the point of loosing money in most cases. Like Sony and eReader (now FictionWise), they have the advantage that they are the DRM-provider / wholesaler and so there is one less party to pay.

Note that publishers could break the Amazon Kindle "monopoly" in an instant. All they need to do is stop using DRM. Then they could sell Kindle versions from their own web site (100% of the revenue to the publisher) and the cost of DRM is removed from the picture.

[Tom90deg]

Maybe this is just me, but I picked up a serious "Keep things as they are" vibe. The book industry needs to look at the Music industry's response to Electronic media. They're going to have to adapt, or they'll go extinct.

[tcv]

Originally Posted by Tom90deg

Maybe this is just me, but I picked up a serious "Keep things as they are" vibe. The book industry needs to look at the Music industry's response to Electronic media. They're going to have to adapt, or they'll go extinct.

Not anytime soon. That my opinion, of course.

[Ervserver]

ummm yea its called progress! either adapt or fade away

[daffy4u]

I see few occasions where I will purchase both a paper and digital version of the same book. Should I get a first edition of one of my favorite authors, I'll read the ebook version. My plan is to be mostly digital (but I give myself permission to change my mind at any time ).

[Walk Broad]

I think Jeff isn't giving out sales figures to continue to protect his pet project.

Sales are probably modest but investors don't want modest sales, they want the massive sales like the iPhone out of the gate.

Like a Hollywood blockbuster. The film may be great, touching audiences and critics alike, but it came out right after "Iron Man" that did a bazillion dollars it's opening weekend. That little film might take a while for others to discover it, but it doesn't mean it's bad film or doesn't deserve to continue to find its audience.

My guess is the same with the Kindle, hence his silence so investors (and pundits) don't squawk.

Can you imagine the outcry of bloggers if even Amazon couldn't do a succesful e-reader?!?

We'd all be subjected to yet another litany of e-books are dead, long live paper books, only socially challenged nerds in their mother's basement read e-books.

Sheesh!

[BooksForABuck]

Originally Posted by wallcraft

I don't think Amazon is selling most of its Kindle books for "well below what it pays publishers". My impression is that publishers get 35% of the list price (e.g. the price shown at mobipocket.com)...

Actually, I believe Amazon pays most publishers 50% of the list price for Kindle books. The 35% of list price is for self-published books sold through Amazon's Digital Text Program.

I believe that Amazon is losing money on many of these eBook sales--and sensibly so. They're investing in jump-starting their own eBook product, recognizing that they have made it easy for Kindle customers to continue buying from them. In the long term, losing money on every unit but making it up in volume is not sustainable, which is probably what the publisher quoted is concerned about.

Rob Preece
Publisher, www.BooksForABuck.com

[lee1234]

I think another reason Amazon is looking at the ebook as a way to save money on their book inventories and book warehouse costs. So even if they are not making money off the ebook sales, they are saving costs from other aspects of their business. But, I think they should subsidize the device instead of the ebooks. The reason why I hadn't bought Amazon Kindle is because it is so damn expensive.

By the way, I feel that Amazon is trying to make Kindle format the standard format of ebook business. Will they succeed? I don't know but I think it is worth it to try. By controlling the format, they control the publishers.

[TadW]

Originally Posted by BooksForABuck

I believe that Amazon is losing money on many of these eBook sales--and sensibly so. They're investing in jump-starting their own eBook product, recognizing that they have made it easy for Kindle customers to continue buying from them.

Seth Godin would agree with you:

Book publishers wholesale their ebooks to Amazon for precisely the same price as their paper books. Amazon loses money on every ebook for the Kindle they sell because publishers don't discount zero-cost ebooks.

Apparently, the publishers don't count the paper, storage, inventory, shredding and shipping expenses in their cost calculations.

...

The amazing thing about the Times story today was the report that the mood at BEA was 'unease' about ebooks. The fastest-growing, lowest cost segment of the business, the one that offers the most promise, the best possible outcome and has the best results... is causing unease! All because of the trees.

[Over]

I'm not following up. How can Amazon being loosing money, if they sell the ebooks at the same price as the paperbacks? Shouldn't they be having a wider margin profit? Or are hardcovers the big money makers?


I always thought that eBooks were better for publishers (less production expenses, shipment, etc), for authors (lower prices=more sales, they can sale directly the eBooks, getting 100% of the revenue, etc) and for the environment (save the trees!).

The only downside would be all bookstores... Without pBooks, they would be completely useless.

[Alexander Turcic]

Originally Posted by Over

I'm not following up. How can Amazon being loosing money, if they sell the ebooks at the same price as the paperbacks? Shouldn't they be having a wider margin profit? Or are hardcovers the big money makers?

I am not sure, but maybe it's related to the opportunity costs, assuming that e-books have a cannibalizing effect on sales of p-books. By selling e-books for less, Amazon is in effect giving away money that it could have earned by selling the equivalent p-books.

[MaggieScratch]

If Amazon gets a 55% discount on hardbacks, then if they get the same deal for ebooks, selling the ebooks for 50% off list price isn't a money-loser; they just don't make much, so it's a loss-leader to promote the Kindle (as has already been pointed out). Right? I'm not that swift with the math, but this seems fairly obvious to me.

[TallMomof2]

And Bezos has shown his willingness to forgo profits in order to establish a market.